Need help with the attached assignment. Required computation for direct material, manufacturing and performance overhead.

Name There are 2 problems, which are set up on separate worksheets within this workbook. Please use this workbook as your exam template and prepare your solution on the specific problem works On the questions that I ask for comments and explanations, I expect more than a one sentence response. Problem 1 worth 8.5 pts and covers material from chapters 10 and 11. Problem 2 Worth 6.5 pts. And covers Chapter 11 material Submit one excel file containing your solution to this assignment. You must show your work to earn any credit, so just typing in the answer will not be acceptable and Referencing cells or typing out your calculations are acceptable methods of showing your work. Save your file using the first initial and last name and the assignment name. Remember it is your responsibility to take the time to verify that your file has uploaded correctly. If orkbook. specific problem worksheet. ne sentence response. You need to make sure your response is answering my question. not be acceptable and you will not earn credit. g your work. uploaded correctly. If there are problems, please contact me immediately. Problem 1 Please make sure you review chapters 10 and 11, and the demonstrations from chapters 10 and 11. Worth 8.5 pts. Foster Corporation uses a standard cost system. There is no beginning or ending work in process, and finished goods inventory balances. The following information was provided concerning the one product produced by this company for the period that just ended: This company used Direct labor hours as the cost driver for the application of overhead. Actual price per kilogram $2.95 Actual kilograms of material used 31,500 Actual kilograms of material purchased 32,000 Actual hourly labor rate $17.50 Actual hours of production 4,900 labor hrs. Standard price per kilogram $2.96 Standard kilograms per completed unit 6 Standard hourly labor rate $17.90 Standard time per completed unit 1 Hour Actual Variable factory overhead $17,395.00 Actual Fixed factory overhead $18,200.00 Standard fixed factory overhead rate $3.25 per labor hour Standard variable factory overhead rate $3.80 per labor hour Budgeted fixed overhead $18,300.00 Units completed during the period 4,950 You have just been hired by a local plastic pool manufacturer to determine if they are controlling their costs. You have decided to use your recent knowledge of variance analysis from chapters 10 and 11 to assist you in this endeavor. You will analyze the variances as stated in the requirements below. Grading Rubric Each Variance worth 0.75 pts. Each U or F designation 0.25 pts. 1 pt. each for variance Comments 0.5 Total pts. Possible 8.5 pts. Required: Make sure you do not forget to label the variances U or F. 1. Calculate the direct materials price and quantity variance. Direct-material purchase price variance should be based on material purchased, since you want to isolate the variance as soon as possible. See bottom page 418 Direct-material Quantity variance should be based on materials used, since this is monitoring the production efficiency. See top of page 418. Direct-material purchase price variance Direct Material Quantity variance 2. Calculate the direct labor rate and efficiency variances. Direct Labor rate variance Direct Labor Efficiency variance 3. Variable manufacturing overhead spending and efficiency variances. Variable overhead spending variance Variable overhead efficiency variance 4. Fixed manufacturing overhead budget and volume variances. Fixed Manufacturing overhead budget variance Fixed overhead volume variance 5. Pick out the one most significant variance that you computed above and explain to me the possible causes of this variance and why you chose it. Problem 2 Worth 6.5 pts. Several years ago the Cookie Company developed a comprehensive budgeting system for profit planning and control purposes. The line supervisors have been very happy with the system and with the reports being prepared on their performance, but both middle and upper management have expressed considerable dissatisfaction with the information being generated by the system. The following is the overhead performance report for the Baking department. Grading Rubric: Each number in budget U or F designation #2 Comments Total points possible Cookie Company Overhead performance report-Baking department For the quarter ended March 31 Units Actual Budget Variance 33,000 36,000 3,000 U Variable Overhead Indirect materials Rework time Utilities Machine setup Total variable overhead cost 33000 8200 65000 16200 122400 34000 8500 66,000 17000 125500 1000 F 300 F 1000 F 800 F 3100 F Fixed overhead Costs Maintenance Depreciation Inspection Total fixed overhead cost Total overhead cost 79200 10000 60200 149400 271800 81000 9800 60000 150800 276300 1800 F 200 U 200 U 1400 F 4500 F After receiving a copy of this overhead performance report, the supervisor of the baking department stated, "These reports are super. It makes me feel really good to see how well things are going in my department. I can't understand why those people upstairs complain so much." Required: Hint: Make sure you have viewed the narrated PowerPoint for chapter 11 The company's vice president has hired you as a consultant to develop a new overhead performance report for the quarter for the Baking department. After you have developed this new performance report, explain to the supervisor of the baking department the reasons for your changes and discuss the issue of controlling costs. Prepare the revised flexible performance report below. The categorization of variable and fixed are correct, so do not adjust this information. Please use the template I have set out below to complete this Performance report. Solution: Cookie Company Overhead performance report-Baking department For the quarter ended March 31 Actual Budget Variance Units Variable Overhead Indirect materials Rework time Utilities Machine setup Total variable overhead cost Fixed overhead Costs Maintenance Depreciation Inspection Total fixed overhead cost Total overhead cost Explain to the supervisor of the baking department the reasons for your changes and discuss the issue of controlling costs. 0.2 pt. each 0.25 pt. each 0.5 6.5 Flexible Budgeting Performance evaluation is difficult when actual activity differs from the activity originally budgeted. Hmm! Comparing costs at different levels of activity is like comparing apples with oranges. 1 Flexible Budgeting Units of Activity Variable costs Indirect labor Indirect materials Power Fixed costs Depreciation Insurance Total overhead costs Original Budget Actual Results Variances 10,000 8,000 2,000 U $ 40,000 30,000 5,000 $ 34,000 25,500 3,800 $6,000 F 4,500 F 1,200 F 12,000 2,000 12,000 2,000 $ 89,000 $ 77,300 0 0 $11,700 F 2 Flexible Budgeting Show expenses that should have occurred at the actual level of activity. May be prepared for any activity level in the relevant range. Reveal variances due to good cos control or lack of cost control. Improve performance evaluation. 3 Flexible Budgeting To FLEX a budget for different activity levels, we must know how costs behave with changes in activity levels. Total variable costs change in direct proportion to changes in activity. Total fixed costs remain unchanged within the relevant range. 4 Flexible Budgeting Cost Formula Per Hour Units of Activity Variable costs Indirect labor Indirect material Power Total variable cost Fixed costs Depreciation Insurance Total fixed cost Total overhead costs $ 4.00 3.00 0.50 7.50 Total Fixed Cost Flexible Budgets 8,000 10,000 12,000 8,000 10,000 12,000 Variable costs are expressed as a constant amount per $ 32,000 unit. 24,000 In the 4,000original $ 60,000 indirect labor was budget, $40,000 for 10,000 units resulting in a $12,000 rate of $4.00 per unit. 2,000 5 Flexible Budgeting Cost Formula Per Hour Total Fixed Cost Units of Activity Variable costs Indirect labor Indirect material Power Total variable cost Fixed costs Depreciation Insurance Total fixed cost Total overhead costs $ 4.00 3.00 0.50 7.50 $12,000 2,000 Flexible Budgets 8,000 10,000 12,000 8,000 10,000 12,000 $ 32,000 24,000 4,000 $ 60,000 $ 40,000 30,000 5,000 $ 75,000 $ 48,000 36,000 6,000 $ 90,000 $ 12,000 2,000 $ 14,000 $ 74,000 $ 12,000 2,000 $ 14,000 $ 89,000 $ 12,000 2,000 $ 14,000 $ 104,000 6 Flexible Budgeting Cost Formula Per Hour Total Fixed Costs Units of Activity Variable costs Indirect labor $ Indirect material Power Total variable costs $ Fixed Costs Depreciation Insurance Total fixed costs Total overhead costs 4.00 3.00 0.50 7.50 $12,000 2,000 Flexible Budget Actual Results 8,000 8,000 $ 32,000 24,000 4,000 $ 60,000 $ 34,000 25,500 3,800 $ 63,300 $ 2,000 U 1,500 U 200 F $ 3,300 U $ 12,000 2,000 $ 14,000 $ 74,000 $ 12,000 2,000 $ 14,000 $ 77,300 0 0 0 $ 3,300 U Variances 0 7 Name There are 2 problems, which are set up on separate worksheets within this workbook. Please use this workbook as your exam template and prepare your solution on the specific problem works On the questions that I ask for comments and explanations, I expect more than a one sentence response. Problem 1 worth 8.5 pts and covers material from chapters 10 and 11. Problem 2 Worth 6.5 pts. And covers Chapter 11 material Submit one excel file containing your solution to this assignment. You must show your work to earn any credit, so just typing in the answer will not be acceptable and Referencing cells or typing out your calculations are acceptable methods of showing your work. Save your file using the first initial and last name and the assignment name. Remember it is your responsibility to take the time to verify that your file has uploaded correctly. If orkbook. specific problem worksheet. ne sentence response. You need to make sure your response is answering my question. not be acceptable and you will not earn credit. g your work. uploaded correctly. If there are problems, please contact me immediately. Problem 1 Please make sure you review chapters 10 and 11, and the demonstrations from chapters 10 and 11. Worth 8.5 pts. Foster Corporation uses a standard cost system. There is no beginning or ending work in process, and finished goods inventory balances. The following information was provided concerning the one product produced by this company for the period that just ended: This company used Direct labor hours as the cost driver for the application of overhead. Actual price per kilogram $2.95 Actual kilograms of material used 31,500 Actual kilograms of material purchased 32,000 Actual hourly labor rate $17.50 Actual hours of production 4,900 labor hrs. Standard price per kilogram $2.96 Standard kilograms per completed unit 6 Standard hourly labor rate $17.90 Standard time per completed unit 1 Hour Actual Variable factory overhead $17,395.00 Actual Fixed factory overhead $18,200.00 Standard fixed factory overhead rate $3.25 per labor hour Standard variable factory overhead rate $3.80 per labor hour Budgeted fixed overhead $18,300.00 Units completed during the period 4,950 You have just been hired by a local plastic pool manufacturer to determine if they are controlling their costs. You have decided to use your recent knowledge of variance analysis from chapters 10 and 11 to assist you in this endeavor. You will analyze the variances as stated in the requirements below. Grading Rubric Each Variance worth 0.75 pts. Each U or F designation 0.25 pts. 1 pt. each for variance Comments 0.5 Total pts. Possible 8.5 pts. Required: Make sure you do not forget to label the variances U or F. 1. Calculate the direct materials price and quantity variance. Direct-material purchase price variance should be based on material purchased, since you want to isolate the variance as soon as possible. See bottom page 418 Direct material price variance=(Standard price-Actual price)*Actual Quantity Standard price $2.96 Actual price $2.95 $0.01 Actual kgs purchased 32,000 $320.00 F Actual prices may exceed standard prices because of a change in market conditions that causes a general price increase for the material. This may be out of the control of management. Adverse price variance might be out of failure of the purchasing manger to seek the most advantageous sources of supply. Direct-material Quantity variance should be based on materials used, since this is monitoring the production efficiency. See top of page 418. Standard Quantity(kgs) Actual Quantity(kgs) 87,912 92,925 (5,013) U 2. Calculate the direct labor rate and efficiency variances. Direct Labor rate variance= (S.R - A.R) * A.H Standard labour rate Actual labour rate Actual hours $ $17.90 $17.50 $0.4 4,900 1,960 F Possible causes. Unplanned Overtime Rise in wage rate which may not be included in the standard costing. Direct Labor Efficiency variance Direct Labor efficiency variance e= (S.H - A.H) * S.R Standard production hours Actual production hours Standard rate 4,900 4,950 (50) $17.90 ($895) U It is normally controllable by the manager of the appropriate production responsibility center. causes include - use of inferior quality materials , different grades of labor 3. Variable manufacturing overhead spending and efficiency variances. Variable overhead spending variance Standard variable factory overhead $18,810.00 Actual variable factory overhead $17,395.00 $1,415.00 F Variable overhead efficiency variance 4950 units should have cost 4950 unit cost an actal overhead of 18,810 17,395 $1,415 F This variance is assumed to vary directly with direct labor hours of input; it's identical to the labor efficiency variance. 4. Fixed manufacturing overhead budget and volume variances. Fixed Manufacturing overhead budget variance Budgeted fixed overhead $18,300.00 Actual fixed overhead $18,200.00 $100 F Fixed overhead volume variance Budgeted fixed overhead Fixed actual fixed overhead 16,088 18,200 (2,113) U 5. Pick out the one most significant variance that you computed above and explain to me the possible causes of this variance and why you chose it. Material Quantity Variance.-This variance is very important since it helps determine the efficiency of the production process in converting raw materials into finished goods. Causes of this Variance. 1. Low quality of raw materials. 2. Materials may be damaged during production. 3. The raw materials may be obsolete. 4. Damage of the raw materials in the process of moving them to the storage area. Problem 2 Worth 6.5 pts. Several years ago the Cookie Company developed a comprehensive budgeting system for profit planning and control purposes. The line supervisors have been very happy with the system and with the reports being prepared on their performance, but both middle and upper management have expressed considerable dissatisfaction with the information being generated by the system. The following is the overhead performance report for the Baking department. Grading Rubric: Each number in budget U or F designation #2 Comments Total points possible Cookie Company Overhead performance report-Baking department For the quarter ended March 31 Actual Budget Variance 33,000 36,000 3,000 U Units Variable Overhead Indirect materials Rework time Utilities Machine setup Total variable overhead cost 33000 8200 65000 16200 122400 34000 8500 66,000 17000 125500 1000 F 300 F 1000 F 800 F 3100 F Fixed overhead Costs Maintenance Depreciation Inspection Total fixed overhead cost Total overhead cost 79200 10000 60200 149400 271800 81000 9800 60000 150800 276300 1800 F 200 U 200 U 1400 F 4500 F After receiving a copy of this overhead performance report, the supervisor of the baking department stated, "These reports are super. It makes me feel really good to see how well things are going in my department. I can't understand why those people upstairs complain so much." Required: Hint: Make sure you have viewed the narrated PowerPoint for chapter 11 The company's vice president has hired you as a consultant to develop a new overhead performance report for the quarter for the Baking department. After you have developed this new performance report, explain to the supervisor of the baking department the reasons for your changes and discuss the issue of controlling costs. Prepare the revised flexible performance report below. The categorization of variable and fixed are correct, so do not adjust this information. Please use the template I have set out below to complete this Performance report. Solution: Cookie Company Overhead performance report-Baking department For the quarter ended March 31 Budget per unActual Budget Variance 33,000 33,000 Units Variable Overhead Indirect materials Rework time Utilities Machine setup Total variable overhead cost Fixed overhead Costs Maintenance Depreciation Inspection Total fixed overhead cost Total overhead cost 0.94 0.24 1.83 0.47 33,000 8,200 65,000 16,200 122,400 31,167 7,792 60,500 15,583 115,042 (1,833) U (408) U (4,500) U (617) U (7,358) U 79,200 10,000 60,200 149,400 271,800 81,000 9,800 60,000 150,800 265,842 1,800 F (200) U (200) U 1,400 F (5,958) U Explain to the supervisor of the baking department the reasons for your changes and discuss the issue of controlling costs. The flexible budget above has been made in order to plan for variations in the level of activity above or below the level set in the fixed budget. Controlling costs is best attained by the preparation of budgets through the respective managers. Each manaager is then expected to investigate the variances between the actual costs and the budgeted costs so as to ensure corrective measures are taken accordingly. Cost control is a contionous process and has the potential of aiding planning, cotrolling and coordination of various decisions in a business. Some of the advantages of cost control include: 1. Enables easy predition of any capital expenditures in the future. 2. Cost control helps in the ellimination of wastes and raises profitability of a business entity. 3. Helps in amending deviations from established standards. 0.2 pt. each 0.25 pt. each 0.5 6.5